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PAM200_Section8_Solutions

# PAM200_Section8_Solutions - PAM200 Section 8 Problem 9.9...

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PAM200 – Section 8 Problem 9.9. The firm’s ANSC (average non sunk cost) curve is given by 32/ Q + 2 Q . To find the shut-down price, we find the minimum level of ANSC . This occurs at the quantity at which ANSC equals MC (Marginal Cost) , or 32/ Q + 2 Q = 4 Q . Solving for Q yields Q = 4, and substituting this into the expression for ANSC tells us that the minimum level of ANSC is equal to 32/4 + 2(4) = \$8. At prices below \$8, a firm’s supply is 0. At prices above \$8, a firm produces a quantity at which P = SMC(short run Marginal Cost) : P = 4 Q , or Q = P /4. Thus, the short- run supply curve for a firm is: < = 8 if 4 . 8 if 0 ) ( P P P P s Since there are 60 identical producers, each with this supply curve, the short-run market supply curve S ( P ) is 60 times s ( P ), or: < = 8 if 15 . 8 if 0 ) ( P P P P S To find the equilibrium price, we equate market supply to market demand and solve for P : 15 P = 400 – 5 P , or P = 20. Problem 9.22.

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PAM200_Section8_Solutions - PAM200 Section 8 Problem 9.9...

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